Restaurants vs Grocery

16 Jan

For those who may not be aware, the US food and beverage market is effectively bifurcated by sales dollars: half goes through grocery, the other half through restaurants. When examining progress and innovation in the space, it is relevant to compare grocery to restaurants, as suppliers will look at where their products end up and determine where to spend their time. Commonly, suppliers cannot generate much ROI in restaurants because there is a dearth of sophistication, and education is not cheap.

In our eyes there’s no clearer example of the void in restaurants than in mobile ordering. OLO, founded in 2005, started providing mobile ordering services to restaurants. Over the past decade they’ve successfully penetrated 150 restaurant brands and raised $25M. If we look at a competitor, we can see the time it takes to sell one of these operators. Tillster recently announced a 2.5 year effort to bring mobile ordering to Burger King. In that same 2.5 year period, Instacart, who deals with grocers and not restaurants, has raised $265M and works with grocers like Costco, WholeFoods, and others to bring mobile ordering AND delivery to grocers.

In this simplistic example, the comparison of grocery to restaurants highlights the major gaps in sophistication. Even though the restaurant market is nearly the same size as grocery, investors have put 10x more money in 1/5th the time into a solution that goes to grocery over one that goes to restaurants. Another way to frame it is that investors think that restaurants are 50x less sophisticated than grocers as measured by the time it takes them to become educated on innovation… and they put their money where their mouth is.